The common seal is a rubber stamp that’s unique to each strata scheme and can be considered as the signature for the scheme. It’s important to discuss the seal because in some instances, members may unwittingly open themselves to personal liability through inappropriate use.
In general, the stamp must be used to execute a binding document and verify an official agreement or contract. The common seal provides evidence of the agreed position of the Owners Corporation.
There is New South Wales state legislation that describes how the seal is to be used. Section 238 of the Strata Schemes Management Act 1996 has the relevant clause.
How should the seal of the owners corporation be affixed?
If an owners corporation has only one owner or 2 owners, the seal of the owners corporation must not be affixed to any instrument or document except in the presence of the owner or owners or the strata managing agent of the owners corporation.
If an owners corporation has more than 2 owners, the seal of the owners corporation must not be affixed to any instrument or document except in the presence of:
- 2 persons, being owners of lots or members of the executive committee, that the owners corporation determines for the purpose or, in the absence of a determination, the secretary and any other member of the executive committee
- the strata managing agent of the owners corporation.
- The strata managing agent must attest the fact and date of the affixing of the seal:
- by his or her signature, or
- if the strata managing agent is a corporation, by the signature of the president, chairperson or other principal officer of the corporation or by any member of staff of the corporation authorized to do so by the president, chairperson or other principal officer.
A strata managing agent who has affixed the common seal of the owners corporation to any instrument or document is taken to have done so under the authority of a delegation from the owners corporation.
Subsection (4) does not operate so as to enable a person to fraudulently obtain a benefit.
A person is taken not to have fraudulently obtained a benefit from the operation of subsection (4) if the benefit was, without any fraud by the person, obtained before the seal was affixed.
So when should the common seal be used?
The seal should only be used when a resolution is passed by the Owners Corporation regarding for example amongst others, contracts for services, making additional rules and the appointment of an Owners Corporation manager. An example of when not to use the seal would be on a Development Application for Council because it only adds confusion to the application.
It’s important to note that the seal should be used when all the written information is clear, without contention and when there are resolutions in place authorizing the use of the seal.
Some Owners Corporations entrust the custody of the seal to their Strata Manager as per the provision in the legislation. In this case, we advise the Owners Corporation to pass a minuted resolution granting authority of the common seal to your Manager.
For more information on the use of the common seal, please contact your Strata Manager at Netstrata.